Oct. 15 (Bloomberg) -- TPG Capital and KKR & Co. are in
talks to acquire Seagate Technology Plc, a deal that would mark
the disk-drive maker’s second leveraged buyout in a decade,
according to people with direct knowledge of the discussions.

The private-equity firms are considering an offer of about
$16 a share, which would value the company at $7.55 billion,
said two of the people, who declined to be identified because
the discussions are private. The firms are looking to contribute
about $4 billion in equity and may seek other buyout funds as
partners, the people said. Bain Capital LLC also is interested
in the deal, according to one person familiar with the firm.

Seagate, the largest maker of disk drives, said yesterday
it was in talks to be taken private, without identifying the
parties involved. The company’s revenue is under pressure amid
competition from storage companies such as Western Digital Corp.
Going private would let Seagate invest in new technology without
the scrutiny trained on publicly traded companies, said John
Rydning, an analyst at Framingham, Massachusetts-based IDC.

“Seagate’s buyout is shaking up the tech industry and
we’ll see more M&As as the boom in smartphones and tablet PCs
causes a paradigm shift,” said Seiichiro Iwamoto, who helps
oversee $35 billion in Tokyo at Mizuho Asset Management Co.
“Companies that only make PC-related products are increasingly
concerned about their profits in the future and need to look to
smartphones and network technologies.”

Biggest Buyout Since 2007

At the price under consideration, Seagate’s buyout would be
the largest, based on equity value, since Blackstone Group LP’s
$26 billion takeover of Hilton Worldwide, which included about
$7 billion in net debt. That deal was announced in July 2007 and
completed in October of that year.

TPG rekindled discussions with Seagate after an earlier
proposal with Silver Lake broke down, the people said. TPG tried
to keep the deal alive by entreating other firms to get
involved, according to the people.

Seagate surged 22 percent to $15.51 at 4 p.m. on the Nasdaq
Stock Market. The shares had dropped 30 percent this year before
today. A $16-a-share bid would be 26 percent higher than
yesterday’s closing price.

Western Digital, the No. 2 disk-drive company, also rose,
gaining 8 percent to $31.89 in New York Stock Exchange trading
on speculation it too may become a takeover target.

Morgan Stanley and Perella Weinberg Partners LP will serve
as financial advisers and Wilson Sonsini Goodrich & Rosati and
Arthur Cox are the legal counsel in the discussions, Seagate
said yesterday in a statement. Brian Ziel, a spokesman for the
company, declined to comment further.

Falling Prices

Demand for storage has helped revive Seagate’s sales and
profit in the past year after a decline during the recession.
Still, the average selling price for its drives dropped 15
percent to $58 in the fiscal year that ended July 2 from $68 in
2008. Rivals to Scotts Valley, California-based Seagate include
Japan’s Hitachi Ltd. and Toshiba Corp. Seagate had a market
value of about $6 billion, based on yesterday’s closing stock
price.

“They’re doing more of the right things than Western
Digital or Hitachi,” said David Rubenstein, a Tokyo-based
analyst at MF Global Ltd. “Those are all striving to be like
Seagate.”

Seagate reported net income of $379 million in the second
quarter, compared with a loss of $83 million a year earlier, as
sales rose 13 percent to $2.66 billion.

Going Private Again

Silver Lake isn’t involved in the current proposal, the
people said. Its earlier talks with TPG unraveled after Seagate
failed to meet financial targets that underpinned the proposed
$7 billion transaction, one person familiar with the matter
said. Morgan Stanley, Deutsche Bank AG and Bank of America Corp.
were advising and offered lending on the deal, the people said.

TPG, located in Fort Worth, Texas, and Silver Lake, based
in New York and Menlo Park, California, owned Seagate before the
company’s initial public offering. They bought Seagate in 2000
and took it public in 2002 for $12 a share.

KKR, a private-equity firm founded by buyout pioneers Henry
Kravis and George Roberts in 1976, is located in New York. The
company listed shares on the New York Stock Exchange this year.

Buyout firms have struggled to restart dealmaking after the
global financial crisis froze credit markets in mid-2007, ending
the biggest LBO boom in history. The firms pool money from
investors to take over companies, financing the purchases mostly
with debt, and intend to sell them later for a profit.

Buyout Drought

TPG, along with Blackstone Group LP and Thomas H. Lee
Partners LP, pursued an ultimately unsuccessful takeover of
Fidelity National Information Services Inc. in May. The private-equity groups offered more than $15 billion for the company,
people with knowledge of the deal said at the time.

Seagate’s disclosure comes amid discussions by buyout firms
to take over Yahoo! Inc., fueling speculation the drought of
deals may be ending. AOL Inc. has talked with private-equity
funds including Silver Lake about a possible bid, according to
two people familiar with the matter.

“The LBO market may be coming back: Sentiment is there,
returns have been good and the people who are looking for assets
are those top-tier funds sitting on cash,” said Kathleen Ng,
managing director at the Centre for Asia Private Equity Research
Ltd. in Hong Kong.